Nexus between foreign exchange rate and stock market: evidence from India

Q2 Economics, Econometrics and Finance Investment Management and Financial Innovations Pub Date : 2023-07-31 DOI:10.21511/imfi.20(3).2023.07

Deba R. Mohanty, Amiya Kumar Mohapatra, Sasikanta Tripathy, Rahul Matta

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Abstract

This study examines the impact of foreign exchange rate fluctuations on various NSE capitalized indices of India. Five exchange rates were chosen based on trading contracts in the currency derivative segment of NSE. These exchange rates are US Dollar-Indian Rupee (USD/INR), Euro-Indian Rupee (EUR/INR), Great Britain Pound-Indian Rupee (GBP/INR), Chinese Yuan-Indian Rupee (CNY/INR) and Japanese Yen-Indian Rupee (JPY/INR), which are used as a regressor in this study. The data of NSE Nifty large-cap 100, Nifty mid-cap 100 and Nifty small-cap from December 1, 2012 to December 1, 2022 was considered for the study. GARCH (1, 1) model was used to analyze the nexus between exchange rate fluctuations and capitalized indices, and it was further validated by DCC GARCH to evaluate the volatility spillover. The result shows that exchange rate fluctuations have a positive effect on stock market volatility along with a varying degree of incidence on small-cap, mid-cap, and large-cap. DCC α has been found to be significant in USD & GBP for small-cap, and GBP & CNY for mid-cap. On the other hand, USD, Euro, CNY and JPY have a significant impact on the large-cap index in the short-run. Further, it is found that there is long-run spillover effect (DCC β) of exchange rates on all capitalized indices of the Indian stock market, and it is highest in in the large-cap case.

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汇率与股市之间的关系:来自印度的证据

本研究考察了外汇汇率波动对印度各种NSE资本化指数的影响。根据NSE货币衍生品部门的交易合约选择了五种汇率。这些汇率是美元-印度卢比(USD/INR)、欧元-印度卢比(EUR/INR)、英镑-印度卢比(GBP/INR)、人民币-印度卢比(CNY/INR)和日元-印度卢比(JPY/INR)，它们在本研究中被用作回归因子。NSE Nifty大盘股100、Nifty中盘股100和Nifty小盘股从2012年12月1日至2022年12月1日的数据被用于研究。采用GARCH(1,1)模型分析汇率波动与资本化指数之间的关系，并通过DCC GARCH进一步验证该模型对波动溢出效应的评价。结果表明，汇率波动对股市波动有正向影响，且对小盘股、中盘股和大盘股的影响程度不同。DCC α在USD &小盘股用英镑，小盘股用英镑;中盘股人民币。另一方面，美元、欧元、人民币和日元在短期内对大盘股指数的影响较大。进一步发现，汇率对印度股票市场所有资本化指数都存在长期溢出效应(DCC β)，且在大盘股情况下最高。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Investment Management and Financial Innovations Economics, Econometrics and Finance-Finance

CiteScore

2.50

自引率

0.00%

发文量

审稿时长

11 weeks

期刊介绍： The international journal “Investment Management and Financial Innovations” encompasses the results of theoretical and empirical researches carried out both on macro- and micro-levels, concerning various aspects of financial management and corporate governance, investments and innovations (including using of quantitative methods). It is focused on the international community of financiers, both academics and practitioners. Key topics: financial and investment markets; government policy and regulation; corporate governance; information and market efficiency; financial forecasting and simulation; financial institutions: investment companies, investment funds, investment banks, hedge funds, private pension funds; objects of real and financial investing; financial instruments and derivatives; efficiency of investment projects; econometric and statistic methods in project management; alternative investments; ratings and rating agencies.